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Today a bipartisan bill was introduced by Senators David Vitter (R-LA) and Jeanne Shaheen (D-NH) called the Small Business Lending Oversight Act of 2016 with the goal of strengthening and improving the effectiveness of SBA's oversight of the 7(a) program.

At NAGGL's SBA Lending Technical Conference earlier this month, many of you heard from our invited congressional guests that the significant growth of the 7(a) portfolio in recent years has led to a great deal of Hill attention on the appropriateness and prudent nature of that growth. Our conversations centered on basic lending principles about setting levels of risk tolerance. In addition, a great deal of discussion focused on determining whether SBA’s Office of Credit Risk Management (OCRM) has adequate resources to encourage good behavior and enforce bad behavior in what has gone from a $17.5 billion portfolio in FY 2014 to what could be $27 billion (or more!) this upcoming fiscal year 2017. Even if you were not in St. Louis, you have heard me and our government relations team on many, many occasions over 30 years speak about the importance of effective lender oversight in order to protect the 7(a) program and to ensure its long-term sustainability.

The recent growth in the program is based on meeting increasing small business borrower demand and should be applauded—it means tens of thousands of jobs and continued successful support of our country’s small businesses. But when any Member of Congress asks questions about our program, we as a trade association will always be at the table giving our reactions. For the past month, NAGGL has been engaged with the Senate Small Business Committee (SBC) staff discussing the question of appropriate lender oversight. We've given a great deal of feedback and offered numerous suggestions—many of which have been incorporated into the bill introduced by Chairman Vitter today. SBA also has been involved in these conversations and offered recommendations, many of which have been incorporated into the legislative language. Ranking Member Shaheen has co-sponsored this bill, and Senators Risch (R-ID), Peters (D-MI) and Ayotte (R-NH) have joined on to the bill--making it a bipartisan bill with the Senate SBC leadership at the helm.

In this vein of great cooperation and believing that this bill does answer many valid congressional questions about prudent lending, NAGGL has provided a letter of support based on the current version of the language. You should also know that the American Bankers Association (ABA) and the Independent Community Bankers Association (ICBA) have also individually sent in letters of support to the Hill.

For those of you familiar with how Congress works, you'll realize that there are still many opportunities for continued input. There is a hearing on Oversight of the SBA’s 7(a) Loan Guaranty Program tomorrow at which Administrator Contreras-Sweet will testify. Then, in about 3 weeks there will be a "markup" of the bill. During this time, there may be technical amendments made to the legislation.Under no circumstances, do we as a trade association want to overlook unintended consequences. If you wish to discuss any of this, please reach out to us.

I know this matters greatly to each one of you, and NAGGL has worked very hard on your behalf to have a big hand in taking what was a draft bill (that easily could have had unintended consequences on the program) and helping it become, through our hours of discussion and input, a bill that we believe can give appropriate additional support to OCRM and ensure that we are starting to set a clear tolerance for risk in the 7(a) portfolio as a whole.

With rapid and significant growth comes the very serious responsibility of working with our partners to ensure that SBA has the resources necessary to ensure proper oversight and that Congress has confidence that the program is being appropriately held accountable. It is a fair question to ask if SBA’s oversight has grown commensurate with the very large surge in volume. Our partners have always strongly supported the 7(a) program and the small businesses that the program serves. But, equally important to lenders, and to NAGGL, is our historical support for necessary and prudent oversight. We define success not only by the volume of loans being made by the industry, but also in the quality of loans reaching small businesses and in meeting the core mission of SBA lending.